Why politicians are wrong to declare war on big tech

Elizabeth Warren is running for the Democratic presidential nomination. Her stand-out pledge is that she wants to break up the big tech companies: Facebook, Google, Apple and Amazon.

The public response has been surprising, not because people agree with it, as I have come to expect, but because they seem to take it as a given that these firms are monopolies.

But that is false. Google, Facebook, Twitter, Netflix and the mysterious offline world are all competing ferociously for your attention.

And while there isn’t a platform that wholly emulates Facebook, the site frequently loses users to people who would rather scroll through a better-optimised feed. That’s why these firms invest so much in updating their algorithms and, despite being “monopolies”, have not started charging.

When it comes to gauging monopoly status, the US and the EU have taken somewhat different approaches. The US usually favours using price as a proxy, and the EU attempts to measure how difficult it is for new competitors to enter the market.

These approaches have their merits and failures, but it’s easy to see why Google has suffered from wanton antitrust cases at the EU’s hands, but has been left largely unperturbed at home.

Elizabeth Warren and the EU are deeply mistaken in choosing to focus on Google, and this difference stems from us having very different ideas about what Google’s product even is.

Google makes no money from Android or Chrome. Google is an ad company (with a small hardware division), and as such they make money from platforms they can put adverts on. This largely refers to Google search and YouTube.

Everything else Google does is merely a method of optimising searches (maps, translate, Google shop) or a means of getting you to use it (Chrome, Android, etc). Android is not a product.

An android phone is the digital equivalent of Ben and Jerry’s buying a shopping centre, creating free parking and giving out shop space to retailers for free, on the sole condition that they are also allowed to set up an ice cream shop at the entrance.

Google has poured billions of dollars into developing the most popular mobile operating system and the most popular internet browser. They have used these as tools to make it more likely that you will choose to use the world’s most popular search tool.

In this context, it is difficult to imagine what breaking up Google would look like. It is impossible to split search from Chrome if Chrome is essentially the free shipping attached to their product.

Perspectives on Google’s business model aside, there are some real, tangible harms in Senator Warren’s proposals.

To unbundle search from maps, translate and Google shopping, Google search would become less functional. I much prefer searching “places to eat near me” and finding places to eat near me thansearching for “Tripadvisor” and then trying to work out what postcode I’m in.

One of the EU’s antitrust cases sued Google because when you search for a product it gives you the product (or an ad for the product) rather than taking you to a shopping comparison site, thereby rendering shopping comparison sites redundant.

If you separated Chrome from search, you would have to remove automatic searches from the URL bar. I would have to type www.google.com much more often, which would be horribly inconvenient and would make the whole internet experience less fluid.

Chrome Corp would also have to find a way to make its own profit. This would probably mean charging or advertising. The same is true if you wanted to create your own Android Corp. None of this is in consumer interests.

Google is a massive company that can take big risks. You don’t spend billions of dollars developing a loss-making phone operating system if you don’t have a lot of spare cash to gamble with.

Google is also the second biggest research and development spender in the world, and this means they can spend billions on future technology like self-driving cars and their experiment with Google Glass. These smaller Googlets that Warren proposes wouldn’t be able to take risks on such a grand scale.

Google also spends a lot on promising start-ups. If you’re worried about dynamism in the American economy, as Warren purportedly is, it seems like it would be counterproductive to cut down the country’s largest corporate investor.

Ultimately, her plans would make some wildly popular products less functional and more expensive. She may even force them into nonexistence and, in the process, curtail the number of new ideas created to replace them.

Despite her wonkish reputation, this recent move has revealed her populist side. It is telling that she has only named consumer-facing companies. There is no logic to choosing big tech while ignoring Berkshire Hathaway or Johnson & Johnson.

Her arguments about tech monopolies also fare perfectly for a number of non-tech smaller companies. For example, supermarkets will often own their own buildings and sell their own branded products, and we generally agree that Tesco’s finest is nothing more than healthy competition for the likes of Tropicana.

Warren should be proud that the most valuable companies in the world were born in her country. And she shouldn’t be seeking to punish their success. If she’s worried about sluggish innovation, there are better, evidence-based methods of encouraging entrepreneurship.

The problem is that policies that make everyone wealthier aren’t going to punish the one per cent, and it is this populist notion that an alarming number of politicians are bent on pursuing. Evidence-based analysis must stop them in their tracks.